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What’s in the E-rate Order? A Streamlined Process

Submitted on July 31, 2014

The third major goal adopted by the Federal Communications Commission in the latest E-rate reform proceeding is to make the E-rate application process (and other E-rate processes) fast, simple and efficient. The FCC adopted a number of programmatic changes, including simplifying the application process by providing a process for expediting the filing and review of applications involving multi-year contracts; eliminating technology plans for internal connections; simplifying and clarifying applicants’ discount rate calculations; simplifying the invoicing and disbursement process; and requiring all Universal Service Fund (USF) requests for review to be filed initially with the E-rate administrator, the Universal Service Administrative Company (USAC). The FCC also aims to reduce the administrative burden on applicants by processing and managing applications more efficiently, modernizing its E-rate information technology (IT) systems, timely publishing all non-confidential E-rate data in an open and standardized format, and communicating more clearly with E-rate applicants and service providers. These changes go into effect in funding year 2015 unless otherwise noted.

I. Simplifying the Application Process

The FCC adopted a simplified application process for multi-year contracts; eliminate the requirement for technology plans; ease the signed contract requirement to allow applicants to seek E-rate support once they have entered into a legally binding agreement with a service provider; exempt from our competitive bidding requirements purchases of commercially available high-speed broadband services that cost less than $3,600 per year; require the use of electronic filings; and enable direct connections between schools and libraries.

1. Simplifying the Application Process for Multi-Year Contracts

The FCC is simplifying the application process for funding requests that involve multi-year (no longer than five years) contracts for eligible services. Applicants that elect to use the multi-year contract funding review process will only be required to submit a complete Description of Services Ordered and Certification Form (FCC Form 471) for the first funding year in which they are seeking E-rate support under the multi-year contract. In subsequent funding years covered by a multi-year contract, applicants will be permitted to use a streamlined application process that will be shorter, require less information from the applicants (1), and be approved through an expedited review process, absent evidence of waste, fraud, or abuse. However, this process does not guarantee funding in subsequent years, even for the same services. E-rate funding will continue to be committed and disbursed on an annual basis. Applicants must be eligible for E-rate support in each of the years funding is sought, and the services must be eligible for support in each such year.

2. Eliminating the Technology Plan Requirements

The FCC eliminated requirements for applicants seeking E-rate support for category two services (i.e. internal connections) to provide a technology plan. (Earlier, the FCC eliminated this requirement for priority one services.) The FCC concluded that the burden of our requirement that applicants for internal connections and basic maintenance of internal connections have certified technology plans outweighs the benefits, particularly for small applicants with limited resources.

The FCC created an exemption in competitive bidding rules for applicants seeking E-rate support to purchase commercially available, business-class Internet access services that cost $3,600 or less for a single year. An Internet access service will be eligible for this exemption only if it offers bandwidth speeds of at least 100 Mbps downstream and 10 Mbps upstream for a pre-discount price of $3,600 or less annually, including any one-time installation and equipment charges, and the service and price are commercially available (i.e. publicly available to enterprise, small business, or other government entity customers in the same form and rates that it is offered to schools or libraries). The annual limit is the pre-discount amount for the service per school or library so a library system or school district will qualify for this exemption if it purchased 100 Mbps downstream and 20 Mbps upstream Internet access service for each of its branches or schools at a cost of $300 per month or less for each branch/school.

4. Easing the Signed Contract Requirement

Applicants are now required to have a signed contract or other legally binding agreement in place prior to filing their FCC Forms 471. Previously, the rule had required applicants to submit their FCC Forms 471 requesting support for services “upon signing a contract for eligible services. There were many instances where applicants had an agreement in place with their service provider or were already receiving services, but had difficulty obtaining signatures prior to the submission of their FCC Forms 471. Absent the existence of a signed contract, in determining whether a legally binding agreement is in place, the FCC directs USAC to consider the existence of a written offer from the service provider containing all the material terms and conditions and a written acceptance of that offer as evidence of the existence of a legally binding agreement. The FCC believes revising the rule in this manner will provide applicants with sufficient flexibility to finalize their service agreements after filing their FCC Forms 471 while protecting the Fund against waste, fraud, and abuse.

5. Requiring Electronic Filing of Documents

All E-rate applicants and service providers must not file all documents to USAC electronically. This requirement will be phased in over the next three funding years – in funding year 2017, all filing will be done electronically.

6. Enabling Direct Connections Between Schools and Libraries

E-rate eligible rural schools and libraries are now allowed to establish direct connections for the purpose of accessing high-speed broadband services. Recognizing that it will likely be necessary to waive some rules to allow E-rate support for such connections, the FCC encourages applicants to file such waiver requests and directs the FCC’s Wireline Competition Bureau to “expeditiously consider such waiver requests and, as appropriate, to waive our rules, as is necessary, to grant such requests, including the rule that would otherwise require both the school and the library to apply for E-rate support.” On advice from the Wireline Competition Bureau, the full FCC may consider amending rules at a future date.

II. Simplifying Discount Rate Calculations

The FCC adopt four changes to the procedures for applicants to use in calculating their E-rate discounts:

School districts are required to calculate and use district-wide discount rates for each application, thus eliminating the need to calculate different discount rates depending on which schools in a district are receiving services. Schools are reminded that they are under an obligation to ensure “that the most disadvantaged schools and libraries that are treated as sharing in the service receive an appropriate share of benefits from those services.”

The FCC modernized its definitions of “rural” and “urban” for purposes of determining applicants’ discount rates. The FCC adopts the Census Bureau definition which classifies a particular location as rural or urban based on population density and geography, and other criteria involving non-residential development. For the 2010 Census, the Census Bureau defined urban areas as the densely settled core of census tracts or blocks that met minimum population density requirements (50,000 people or more), along with adjacent territories of at least 2,5000 people that link to the densely settled core. “Rural” encompasses all population, housing, and territory not included within an urban area. Any school district or library system that has a majority of schools or libraries in a rural area that meets the statutory definition of eligibility for E-rate support will qualify for the additional rural discount.

For schools and school districts that receive funding under the new community eligibility provision (CEP) of the United States Department of Agriculture’s (USDA) National School Lunch Program (NSLP), the FCC now allows them calculate their E-rate discount rates with the same approach they use for determining their NSLP reimbursement rate. Specifically, schools utilizing the CEP shall calculate their student eligibility for free or reduced priced lunches by multiplying the percentage of directly certified students by the CEP national multiplier. This number shall then be applied to the discount matrix to determine a school district’s discount for eligible E-rate services. (Libraries’ discount percentages will continue to be based on that of the public school district in which they are physically located.)

The FCC directs USAC to require schools that calculate discount eligibility based on projections from school-wide surveys to base their E-rate discount rate only on the surveys they actually collect. (2)

School districts are required to calculate their E-rate discounts by: dividing the total number of students in the district eligible for the NSLP by the total number of students in the district and comparing that single figure against the discount matrix to determine the school district’s discount rate for E-rate supported services. All public schools and libraries within that public school district will receive the same discount rate. For the sake of simplicity, library systems that have branches or outlets in more than one public school district should use the address of the central outlet or main administrative office to determine which public school district the library system is in, and should use that public located in school district’s discount rate when applying as a library system or on behalf of individual libraries within that system.

Consortia applications will continue to use a simple average of all members’ discounts to calculate the overall consortium discount, but will now be required to use each member’s district-wide discount.

III. Simplifying the Invoicing and Disbursement Processes

The FCC took measures related to the invoicing process to simplify and expedite funding disbursement. The FCC believes these modifications will yield an invoicing process that is simpler and clearer, while still providing
protections against waste, fraud, and abuse. The FCC:

Revised its rules to allow an applicant that pays the full cost of the E-rate

supported services to a service provider to receive direct reimbursement from USAC.

To ensure that Tribal schools and libraries are able to participate effectively in the program, the FCC will enhance its Tribal consultation, training, and outreach. The FCC also seeks to gain a better understanding of the current state of connectivity among Tribal schools and libraries to enable the FCC to take steps that will reduce the digital divide and promote high-speed broadband connectivity to Tribal lands.

1. Consultation

The FCC finds that more extensive government-to-government consultation with Tribal Nations is necessary to understand both the need for E-rate support on Tribal lands and how to successfully connect Tribal schools and libraries with modern high-speed communications. The FCC needs data on how E-rate has impacted connectivity on Tribal lands to date, which Tribal schools and libraries receive E-rate and for what uses, what services are available to those schools and libraries, what the price structure is on Tribal lands, what speeds are available and needed on Tribal lands, and where broadband infrastructure still is most needed. So the FCC is directing its Office of Native Affairs and Policy (ONAP) to conduct government-to-government consultation for the purpose of determining how best to gather data on current connectivity levels and help the FCC better determine the need for E-rate support among Tribal schools and libraries.

2. Training

The finds that training tailored to the specific and often unique needs of Tribal schools and libraries is necessary to ensure that Tribal Nations are informed and empowered to participate fully in the E-rate program. ONAP will develop and provide Tribal-specific E-rate training targeted to Tribal schools and libraries. ONAP will advise USAC on the most appropriate timing and mechanism to provide such training, outreach, and materials to Tribal schools and libraries. And ONAP will coordinate with USAC to incorporate and distribute USAC E-rate training materials when mobilizing the Native Learning Lab

3. Outreach

With ONAP’s help, USAC will create a formal Tribal liaison to assist with Tribal-specific outreach, training, and assistance. The liaison will:

coordinate closely with ONAP and the Wireline Competition Bureau on all Tribal training initiatives and
communicate directly with Tribal schools and libraries throughout the E-rate process and to help a) conduct and coordinate Tribal-specific trainings and training materials, b) initiate and respond to Tribal “Helping Applicants To Succeed” requests and visits, c) field questions from Tribal schools and libraries regarding the E-rate program and process, and d) attend national and regional Tribal conferences or meetings where Tribal school and libraries are present.

V. Requiring Filing of Appeals with USAC

Parties aggrieved by an action taken by a division of USAC, including the Schools and Libraries Division, to first seek review of that decision by USAC before filing an appeal with the FCC.

VI. Directing USAC to Adopt Additional Measures to Improve the Administration of the E-rate Program

As noted above, the Universal Service Administrative Company (USAC) is an independent, not-for-profit corporation designated by the FCC as the administrator of universal service – including the E-rate program. USAC works to protect the integrity of universal service through informing and educating program audiences, collecting and distributing contributions, and promoting program compliance. USAC was created in 1997 as a not-for-profit subsidiary of the National Exchange Carrier Association (NECA).

USAC has three divisions that administer the four universal service support programs: High Cost and Low Income, Rural Health Care, and Schools and Libraries divisions. The Finance Division is responsible for the finances of the corporation including billing, collection, and disbursement of all funds for the four programs. The Information Systems Division is responsible for providing overall operating support to the corporation. The Internal Audit Division is responsible for conducting audits of USAC, the support programs, and program beneficiaries. The External Relations Division is responsible for communication with stakeholders including Congress, the FCC, the media, and program participants. The Office of the General Counsel is responsible for providing legal advice and support to the corporation. The Human Resources and USAC Operations Division is responsible for managing employee- and facilities-related business.

Committees of the USAC Board of Directors govern the functions of each division. Each committee of the USAC Board oversees the budgets of its respective division and reports to the USAC Board. USAC's Schools & Libraries Committee consists of seven USAC board members, including three school representatives, one library representative, one service provider representative, one at-large representative elected by the board, and USAC's chief executive officer.

USAC works to ensure that the process for program participants is streamlined and easy to use. Each quarter, USAC reports data to the FCC on the collection, disbursement, and cost of administering universal service support.

In this order, the FCC asked for four improvements in E-rate administration.

The FCC adopted a specific application review and funding commitment target for all category one funding requests as a performance measure in evaluating progress towards streamlining the administrative process. The FCC directs the USAC to aim to issue funding commitments or denials for all “workable” (3) funding requests by September 1st of each funding year. The FCC will measure the timely processing of funding commitments to eligible schools and libraries by tracking the processing time against an established target. The FCC also instructs USAC to survey applicants and service providers about their experience with the program.

2. Modernizing USAC’s E-rate Information Technology Systems

The FCC continues to work on modernizing USAC’s E-rate Information Technology (IT) systems, but admits it is a long-term project. The modernization will focus on easing the administrative burdens on E-rate applicants and service providers, while protecting against waste, fraud and abuse, and on collecting high-quality data that will assist the FCC in measuring progress towards its E-rate goals.

3. Requiring Open and Accessible E-rate Data

The FCC now requires USAC to publish all non-confidential E-rate data in open, standardized, electronic formats. USAC must provide the public with the ability to easily view and download non-confidential E-rate data, for both individual datasets and aggregate data. USAC is directed to design open and accessible data solutions in a modular format to allow extensibility and agile development, such as providing for the use of application programming interfaces (APIs) where appropriate and releasing the code, as open source code, where feasible. USAC’s solutions must be accessible to people with disabilities, as is required for federal agency information technology. The solutions must also, on a going-forward basis, incorporate international standards and best practices for security and privacy controls.

4. Adopting Plain Language Review

In this order the FCC directed USAC to make its communications simpler and clearer so that applicants and service providers will have no difficulty understanding the information and direction that USAC provides them. USAC is to work with the FCC on a full review/revision of USAC’s most commonly used correspondence using plain language, before the beginning of funding year 2016.

VII. Protecting Against Waste Fraud and Abuse

The FCC revised its document retention requirements and compliance procedures and clarified that applicants must permit inspectors on their premises.

Documents must be retained for 10 years (was five) after the latter of the last day of the applicable funding year, or the service delivery deadline for the funding request.

E-rate applicants and service providers must permit auditors, investigators, attorneys or any other person appointed by a state education department, USAC, the FCC or any local, state or federal agency with jurisdiction over the entity to enter their premises to conduct E-rate compliance inspections.

The applicant will only be required to basic information identifying the applicant, confirm that the funding request is a continuation of a FRN from a previous year based on a multi-year contract, and identify and explain any changes to their application, such as changes in the discount rate, the membership of a consortium, or the services ordered.

Until now, a school using a school-wide income survey needed to collect surveys from at least 50 percent of its students. It could then calculate the percentage of NSLP-eligible students from the returned surveys, and project that percentage of eligibility for the entire school population, for purposes of determining its discount rate under the E-rate program

“Workable” means that a funding request is filed timely and is complete, with all necessary information, to enable a reviewer to make the appropriate funding decision, and the applicant, provider, and any consultants are not subject to investigation, audit, or other similar reason for delay in a funding decision.